Ernst: Flood insurance brings sticker shock

Published: Thursday, October 31, 2013 at 1:38 p.m.

Last Modified: Thursday, October 31, 2013 at 1:38 p.m.

I hadn't paid much attention to the reports that flood insurance premiums were starting to skyrocket in Southwest Florida.

Facts

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To determine whether your property falls into a high-risk zone, visit floodsmart.gov. A red box on the right side of the home page allows you to put in your address and see what risk-zone you are in and see an estimated annual cost for flood insurance.

As most casual observers, I had read something about a federal law that might raise the insurance bills for owners of waterfront properties. That's not me, I thought.

Out of curiosity, after several articles appeared in the Herald-Tribune on Sunday and Monday, I checked into how the law might affect my property.

Right now I pay about $1,500 a year for flood insurance on my house, which, I learned, is in a high-risk flood area. That's a lot of money, but I've gotten used to the gradual increases over 20 years

Little did I know how good I had it. According to a FEMA worksheet, the new law, which took effect Oct. 1, could raise my rates to $11,000, or just about double my mortgage.

And, the Federal Emergency Management Agency's new flood maps, which won't go into effect in Sarasota County until 2015, may expand risk zones or raise the required elevation for buildings, which could in turn hike my insurance premium to levels greater than $11,000 a year.

Now I'm paying attention.

The Biggert-Waters Act, passed by Congress last year, makes sense in theory. The National Flood Insurance Program, which writes most coverage, is in debt from big storms, such as Katrina.

Rates didn't cover claims, so rates have to be raised. In establishing new ones, it seems logical to charge more to those who live in the most flood-prone areas.

But theory has quickly run into reality.

The changes adopted are too much too fast. It's like trying to preserve the liquidity of Social Security by suddenly doubling everyone's federal income taxes.

Honestly, I don't know where I would come up with $11,000 for flood insurance. Maybe once. Maybe twice. But every year? No way.

I look around, and I don't see how most of my neighbors could afford this type of increase either. We don't live in a wealthy area. We live in older homes that happen to be near Lemon Bay in Englewood.

Most of the older homes were installed at lower elevations, according to what the law allowed then. My home, built in 1974, lies at 8 feet; the base elevation for my neighborhood is 13 feet, even though many of the homes are below that.

Such older homes, by the way, are getting a double hit. Not only are they in the high-risk flood areas, but they're below the elevation now required by code and their owners will be penalized twice under the new system.

As it stands now, I'm trapped. I have a mortgage, so I have to buy flood insurance. That's the law. I don't have the cash to pay off my mortgage, and I can't take a gamble and go without insurance.

It would cost too much to lift my house to the base elevation, and that would probably cause all sorts of unforeseen structural problems anyway.

And I can't sell it, because no one will want a 40-year-old house if they discover they have to pay $11,000 a year in flood insurance.

"It's a big can of ugly, ugly worms, and I think someone ought to put the lid back on it," says Ron Smith of Englewood, an Allstate agent who also handles flood insurance.

"It's going to be a real shock," says independent agent David Dignam of Key Agency in Englewood. "As people get their renewals, there's going to be a lot of screaming."

Dignam says he's already dealing with one client whose commercial building insurance shot up from $8,800 to $65,000.

It's not hard to imagine property owners simply walking away as they did during the Great Recession. That would have a debilitating effect on Florida, which has one-fourth of the nation's 1.2 million high-risk, subsidized policies.

The changes extend up and down every coastline, and along rivers and lakes. Fortunately, Congress is taking another look at what it has wrought, and one proposal on the table would delay implementation for four years.

At the very least, FEMA should have to do the affordability study that was part of the original legislation but never conducted.

If that study has any integrity, it will turn this so-called reform on its head, not just kick it down the road.

<p>I hadn't paid much attention to the reports that flood insurance premiums were starting to skyrocket in Southwest Florida.</p><p>As most casual observers, I had read something about a federal law that might raise the insurance bills for owners of waterfront properties. That's not me, I thought.</p><p>Out of curiosity, after several articles appeared in the Herald-Tribune on Sunday and Monday, I checked into how the law might affect my property.</p><p>Right now I pay about $1,500 a year for flood insurance on my house, which, I learned, is in a high-risk flood area. That's a lot of money, but I've gotten used to the gradual increases over 20 years</p><p>Little did I know how good I had it. According to a FEMA worksheet, the new law, which took effect Oct. 1, could raise my rates to $11,000, or just about double my mortgage.</p><p>And, the Federal Emergency Management Agency's new flood maps, which won't go into effect in Sarasota County until 2015, may expand risk zones or raise the required elevation for buildings, which could in turn hike my insurance premium to levels greater than $11,000 a year.</p><p>Now I'm paying attention.</p><p>The Biggert-Waters Act, passed by Congress last year, makes sense in theory. The National Flood Insurance Program, which writes most coverage, is in debt from big storms, such as Katrina.</p><p>Rates didn't cover claims, so rates have to be raised. In establishing new ones, it seems logical to charge more to those who live in the most flood-prone areas.</p><p>But theory has quickly run into reality.</p><p>The changes adopted are too much too fast. It's like trying to preserve the liquidity of Social Security by suddenly doubling everyone's federal income taxes.</p><p>Honestly, I don't know where I would come up with $11,000 for flood insurance. Maybe once. Maybe twice. But every year? No way.</p><p>I look around, and I don't see how most of my neighbors could afford this type of increase either. We don't live in a wealthy area. We live in older homes that happen to be near Lemon Bay in Englewood.</p><p>Most of the older homes were installed at lower elevations, according to what the law allowed then. My home, built in 1974, lies at 8 feet; the base elevation for my neighborhood is 13 feet, even though many of the homes are below that.</p><p>Such older homes, by the way, are getting a double hit. Not only are they in the high-risk flood areas, but they're below the elevation now required by code and their owners will be penalized twice under the new system.</p><p>As it stands now, I'm trapped. I have a mortgage, so I have to buy flood insurance. That's the law. I don't have the cash to pay off my mortgage, and I can't take a gamble and go without insurance.</p><p>It would cost too much to lift my house to the base elevation, and that would probably cause all sorts of unforeseen structural problems anyway.</p><p>And I can't sell it, because no one will want a 40-year-old house if they discover they have to pay $11,000 a year in flood insurance.</p><p>"It's a big can of ugly, ugly worms, and I think someone ought to put the lid back on it," says Ron Smith of Englewood, an Allstate agent who also handles flood insurance.</p><p>"It's going to be a real shock," says independent agent David Dignam of Key Agency in Englewood. "As people get their renewals, there's going to be a lot of screaming."</p><p>Dignam says he's already dealing with one client whose commercial building insurance shot up from $8,800 to $65,000.</p><p>It's not hard to imagine property owners simply walking away as they did during the Great Recession. That would have a debilitating effect on Florida, which has one-fourth of the nation's 1.2 million high-risk, subsidized policies.</p><p>The changes extend up and down every coastline, and along rivers and lakes. Fortunately, Congress is taking another look at what it has wrought, and one proposal on the table would delay implementation for four years.</p><p>At the very least, FEMA should have to do the affordability study that was part of the original legislation but never conducted.</p><p>If that study has any integrity, it will turn this so-called reform on its head, not just kick it down the road.</p><p><i>Eric Ernst's column runs Wednesdays, Fridays and Sundays. Contact him at eric.ernst@heraldtribune.com or (941) 486-3073.</i></p>